Working Paper No. 14-39:
The Tax Lawyer as Gatekeeper

Author(s):

Abstract:

The
modern tax lawyer has many different roles. She serves as advisor, advocate,
engineer, endorser, insurer, and, at times, even adversary. In addition, as
concerns about tax abuse and an eroding tax base have grown, legislators and
the Internal Revenue Service have increasingly relied on tax lawyers to provide
various quasi-gatekeeping functions. As constructed, however, this role is
neither precise nor consistent. In many respects it muddles the roles of the
tax lawyer, causes undue client conflicts, and merely serves as an obstacle to
the sound and efficient provision of legal advice while failing to deter
significant amounts of wrongdoing. This Article argues that in the
prelitigation phase of a tax lawyer’s representation, the tax lawyer is well
suited to perform a gatekeeping function and should do so.

The
current legal rules governing taxpayers and their advisors comprise a labyrinth
of procedures and controls that ineffectively regulate the modern tax system.
Although the tax lawyer is certainly vested with a number of quasi-gatekeeper
responsibilities, her duties often either over-effect or under-effect an ideal
gatekeeper model. Within the proper framework, however, the tax lawyer is well
positioned to perform the gatekeeping tasks of guidance, compliance monitoring,
and misconduct prevention. These gatekeeping functions are consistent with the
long-standing professional responsibilities of a lawyer, and a sound
gatekeeping system could also help reconcile the otherwise conflicting duties
tax lawyers face.

This Article explores
various modifications and refinements that must be made to the legislative and
regulatory regime governing the behaviors of tax lawyers and taxpayers in order
to fully realize the benefits of the tax lawyer‘s gatekeeping potential.
Specifically, the proposed gatekeeping structure seeks to eliminate some of the
ineffective and overly adversarial elements of the system, raise the standards
for tax legality and penalty protection between tax lawyers and taxpayers, and
augment the tax lawyer’s due diligence responsibilities.